THE ECONOMY

[IdleRich]

I've never been one of the most financially prudent out there, in fact, when it comes to money I've oftened been described as "feckless" "reckless" "a spendthrift" "a wastrel" and also "a cunt" (though come to think of it that was for another reason), I've had countless bailiffs set on me, appeared in court at risk of losing my flat after not paying my mortgage, one time my bank ordered me to cut up my card and send it back to them.... but even I can see that if it takes someone six weeks to save up for a pizza they probably shouldn't be borrowing money to buy it.

 

[luka]

when youre as rich as you what would it even mean to be finanicalyl prudent? youre hardly going to run out. its monopoly money isnt it

 

[vimothy]

🤨

 

[craner]

Vim's on the piss!

 

[vimothy]

I've been attempting to read the current reporting on inflation, energy prices etc and just glazing over. Anyone keenly following this stuff and able to explain what's happening and how serious it is?

roubini is worth reading on this: https://www.project-syndicate.org/c...-persist-or-deepen-by-nouriel-roubini-2021-08

 

[vimothy]

This is one of the things I was thinking about when in the other thread people were talking about how crypto and other stuff is based on a mutual kinda joint fantasy - I really don't see that as a new thing at all.

There seems to be a huge misunderstanding wherein people think pound coins and 10 dollar notes and so on are "real" - I suppose because they have a tangible representation that you can hold in your hand. I remember reading an opinion piece with someone speaking disparagingly about "funny money" and speculation and so on, saying that they, by virtuous contrast kept their money under their bed - totally failing to grasp that the value in those notes can evaporate just like a dodgy mortgage backed security even as the notes themselves remain.

OK to be generous, perhaps there is a point that if cash itself is intangible and derives value only from collective belief then perhaps a derivative product is intangible squared... even less real. But I still think the step from solid and real to fantasy is the big one and most people don't even realise that they have taken in.

one fundamental diff bw crypto and "real" money and that is "real" money is a genuine financial liability and crypto is not

 

[vimothy]

Very sound considerations here. Especially since most of the money in the US money system exists as numbers on privately administered ledgers. In that sense also, crypto is not very new. Also gold standard was severed long ago, to my knowledge.

ok, but how was this money created?

 

[Clinamenic]

ok, but how was this money created?

US dollars? My understanding is that most of the money in the US money supply is issued as credit by the fed to commercial banks, in exchange for some assets from the banks. And that the minority is actually printed linen money by the engraving office, which I believe is directly subordinate to the department of the treasury.

That said, I don’t have an understanding of how commercial banks maintain their ledgers.

 

[vimothy]

the way (broad) money comes into existence is that banks extend loans to customers

 

[vimothy]

this is fundamentally diff to crypto

 

[Clinamenic]

Yeah my understanding with crypto is generally that the supply cap and issuance rate are algorithmically determined and can can only change with a majority vote of nodes in the network.

 

[Clinamenic]

A vote to change the code, that is.

 

[vimothy]

its not a question of how fast crypto is created but rather what crypto *is*, and what it is is is fundamentally different to "money" in the typical sense, bc money is a financial liability and crypto is not

 

[Clinamenic]

Have you looked into any crypto lending platforms? The ones I use, and the others I’ve seen, generally only give out overcollateralized loans, which can automatically incrementally liquidate if the collateral depreciates. Haven’t seen any that require any kind of credit score, that is.

 

[Clinamenic]

its not a question of how fast crypto is created but rather what crypto *is*, and what it is is is fundamentally different to "money" in the typical sense, bc money is a financial liability and crypto is not

As in, the banknote is a liability for the bank that issues it? Yeah I see how that is fundamentally different to crypto.

 

[vimothy]

yes and they are very interesting - since they imply a parallel crypto banking system with bitcoin (or whatever) as the base asset

 

[Clinamenic]

Perhaps this may change if stablecoin issuers are required by regulators to have a backing of dollars that they are obliged to exchange for stablecoins upon request, but I don’t know if that could happen or not.

edit: this could make stablecoins a liability, that is.

 

[Clinamenic]

yes and they are very interesting - since they imply a parallel crypto banking system with bitcoin (or whatever) as the base asset

I think for the most part it would be Ethereum, in that many of the most popular tokens are built on Ethereum, although Bitcoin dominance is still plain as day.

 

[vimothy]

the fundamental problem for crypto: suppose it succeeds. in which case the whole financial system is still possible. and if that system is necessary, then it is implied

 

[vimothy]

Perhaps this may change if stablecoin issuers are required by regulators to have a backing of dollars that they are obliged to exchange for stablecoins upon request, but I don’t know if that could happen or not.

edit: this could make stablecoins a liability, that is.

stablecoins are a financial liability by definition